They could proxy the SSL connections and still let people log in while monitoring the traffic. Of course, your browser will complain if they rewrap it in SSL unless they get a cert like Iran did.
They don't need to do what Iran did. What Iran did was get a cert that was automatically trusted by nearly every web browser in the world because the issuer was a trusted CA by default. You only need a trusted cert if you don't want users to get a warning. Iran was trying to be sneaky. Pakistan is up front about wanting to monitor traffic. They can use any cert they want. They could use a self signed cert to proxy SSL. Sure, the browser will complain that it's not a trusted cert, but the government is already saying they are going to monitor everything. If users add the cert to the "trusted" list they won't get the warning anymore.
